Americans recently have been shocked to learn of lax standards
surrounding the protection of key nuclear secrets.

Because of the potential for loss of life, this scandal may
trump all others in significance. But another, less known scandal
may have even more serious implications for the rule of law.

In this scandal, high government officials of the Clinton Administration,
working with federal agencies like the Federal Deposit Insurance
Corporation (FDIC), Department of the Interior and others, sought
to prosecute a man because they wanted his property.

While doing so, at least one government agency, the FDIC, lied,
defrauded taxpayers of at least $100 million, attempted to seize
authority belonging to Congress, followed the dictates of special
interests rather than official procedures and generally behaved
as though it was above the law.

The FDIC's misbehavior was so great a federal judge, noting
that the FDIC was engaging in "active misrepresentations"
and "hammering citizens," compared it to the Mafia.

The case goes back to the 1980s, when a Texas savings and loan
failed because of the Texas real estate and oil recession and
interest rate volatility of the time. A company called Maxxam,
chaired by Charles Hurwitz, was a 28% minority investor in the
company that owned the S&L.

Fast-forward to the mid-1990s. Several environmental activist
groups want the government to protect a plot of California redwoods
on land zoned for logging that is owned by a Maxxam subsidiary.
The environmentalists have a brainstorm: convince the government
to blame Maxxam and Hurwitz for the S&L failure and use the
government to force Maxxam to surrender the land.

The environmentalists apparently forgot that government should
prosecute citizens only in the pursuit of justice, not in the
pursuit of free land.

To their shame, when this scheme was suggested, government
officials did not reject it. Instead, then-White House Chief of
Staff Leon Panetta endorsed it, saying "Budgetary constraints
have made it impractical to acquire such an expensive tract of
land through outright federal purchase." Numerous high-ranking
members of Congress similarly pressured the FDIC. Meanwhile, environmentalists
pressured the government to act against Maxxam and Hurwitz, going
so far as to offer $50,000 to anyone who could help send Hurwitz
to jail.

Using a brief suspiciously similar to a memo by one of the
activist groups, the FDIC sued Maxxam and Hurwitz. Because the
FDIC did not expect to win, it also paid a sister agency, the
Office of Thrift Supervision (OTS), to do so as well. OTS suits
are easier for the government to win because they are decided
by the OTS itself rather than the courts.

In the meantime, Maxxam and Hurwitz sold the government the
land, by several accounts for less than it is worth. Meanwhile,
the suits continue, reportedly because the government wants still
more land.

This scandal cries out for a congressional investigation, because:

* Agencies must place the interests of the taxpayer over special
interests. During the Maxxam case, the government sold the failed
S&L. Maxxam offered $100 million more for it than the other
bidder but the government selected the other buyer, apparently
because of its antipathy for Maxxam. Loss to taxpayers: $100
million.

* Agencies must be accountable to Congress. When this story
came to light, House Majority Whip Tom DeLay (R-TX), arguably
the most influential member of Congress and a member of the House
appropriations subcommittee overseeing the FDIC budget, asked
the FDIC specific questions. The FDIC's response contained outright
falsehoods.

* The government should file suits only on their merits, not
under political pressure.

* If the FDIC wins a lawsuit over an S&L failure, it should
recover cash. That is, after all, what the taxpayers spent bailing
out S&Ls.

* If the federal government decides to acquire land, it should
be with an appropriation voted on by Congress, not on the authority
of an agency that is not authorized to purchase land.

Some believe the protection of redwood trees is so important
that it justifies taking shortcuts with civil rights. But half
a century ago, a similar situation took place. Then, the cause
was winning World War II, and the issue was the involuntary incarceration
of Americans of Japanese descent. The federal government decided
then that violating the civil rights of these Americans was justified
because the cause was important.

Americans today are appalled by that reasoning. As we should
be. No cause, however popular, justifies the elimination of civil
rights.

# # #

Amy Ridenour is president of The National Center for Public
Policy Research. Comments may be sent to [email protected]